Liability for Failure to Submit CFC Reporting: What Business Owners Should Know

Since 2022, Ukraine has fully implemented Controlled Foreign Company (CFC) rules. Ukrainian tax residents are now required to disclose foreign companies, submit financial reports, and, where applicable, pay taxes on CFC profits. Failure to comply may lead to significant legal and financial consequences.

What Reporting Must CFC Owners Submit?

A Ukrainian resident controlling a foreign company must:

• disclose the existence of the CFC in the annual tax declaration;
• submit a CFC report containing:
  • company registration and operational details;
  • financial statements;
  • profit or loss calculations;
  • tax calculations related to the CFC.

Who Must File the Report?

The controlling person must submit the CFC report together with the annual tax declaration.

A controlling person is a Ukrainian resident who:

• owns more than 50% of a foreign company;
• owns more than 10% if several Ukrainian residents jointly control more than 50%;
• or exercises actual control over the company, even without formal ownership.

What Liability Exists for Failure to Submit CFC Reporting?

Ukrainian law establishes substantial penalties for violations.

Main Penalties

• Failure to notify about a CFC — UAH 100,000 per CFC.
• Failure or late submission of a CFC report — UAH 300,000 per CFC.
• Failure to provide supporting documentation — UAH 300,000 per CFC.
• Repeated violations within 3 years — doubled penalties.

Important

Reporting obligations apply even to dormant or loss-making companies if they qualify as CFCs.

Additional Liability

Tax Assessments

If reporting is not submitted, tax authorities may independently assess taxes based on the entire profit of the CFC.

Financial and Administrative Liability

Possible consequences include:

• penalties and late-payment interest;
• additional fines;
• bank account restrictions;
• other enforcement measures.

Criminal Liability

Tax evasion involving particularly large amounts may result in criminal liability under Article 212 of the Criminal Code of Ukraine.

How to Reduce Risks?

• Conduct an audit of your business structure to determine whether a CFC exists.
• Properly document the existence or absence of control.
• Prepare reporting documents in advance.
• Work with experienced legal and tax advisors.
• If deadlines were missed, seek legal assistance regarding voluntary disclosure procedures.

Why Is Legal Support Important?

CFC compliance is not only about tax reporting — it is also a matter of business transparency and legal security. Penalties for non-compliance can be substantial even for large businesses.

The Ukrainian Bar and Real Estate Association provides comprehensive legal assistance for owners of foreign companies, including:

• corporate structure analysis;
• CFC compliance support;
• preparation and submission of reports;
• tax planning;
• appeals against penalties;
• communication with tax authorities.